Patents and Innovation Economics

The study of economics would be the same thing as the study of evolution of humans if humans did not invent. Without invention there is no reason for trade. Why would we trade my berries for your berries if they are essentially the same berries? If we both eat the same dead animals, what would the purpose of trade be? Without trade, production is limited to the immediate needs of the person. Perhaps you might store up some nuts, but everything else will spoil. Note that shelter is an invention, unless it only involves taking over a cave or a hole in a tree. The unique feature of man is that he is a rational animal and in the economic realm this means that he invents. No other animal invents. Only humans change their environment to meet their needs.

The driving function of evolution is the Malthusian Trap. In the Malthusian Trap, food (things need to survive) is limited and population growth in any species is always greater than the growth of the food supply, except humans very recently. This puts species into competition for food and selects for the species that are most successful in a given area. The only reason that humans (some) were able to escape the Malthusian Trap was that they invented faster than their population grew. Meaning the rate at which technology changed provided greater productivity growth than the expansion in the population. Why after 20,000 to 100,000 years of human existence did people in England, the United States, and the West suddenly escape the Malthusian Trap? Clearly, the rate of invention accelerated in these places so that productivity outstripped population growth. But why there and why then? There is extensive evidence that the introduction of property rights (individual – there is no such thing as group property rights) always provides a strong incentive to maximize return on an asset. England and then the U.S. at the beginning of the Industrial Revolution were the first large groups of people to introduce property rights in inventions. This provided the necessary impetus to invent new technologies and diffuse them widely. Clearly, patents cannot provide this incredible benefit outside of a system of individual rights and property rights. However, it was the linchpin that launched large groups of humans outside of the Malthusian Trap and the constraints of biological evolution.